0001990354-25-000012
SEC filingWaystar delivered 15.4% revenue growth in Q3 2025, driven by subscription and volume-based gains, with net income turning positive.
Waystar reported strong results for the three months ended June 30, 2025. Revenue grew 15.4% to $270.7 million, driven by a 16.7% increase in subscription revenue ($131.1M) and a 14.4% increase in volume-based revenue ($138.3M). Subscription revenue, almost entirely from provider solutions, benefited from new and existing client additions. Volume-based revenue growth was led by patient payments solutions ($11.2M increase) and provider solutions ($6.2M increase).
Cost of revenue (excl. D&A) increased 8.2% to $87.0M, with higher transaction volume costs partially offset by savings in provider solutions. Operating expenses overall declined 9.1% due to a significant reduction in stock-based compensation ($25.4M decrease) from non-recurring performance condition options in the prior year. This drove operating income to $64.8M (24.0% margin) versus $8.2M (3.5% margin) in Q3 2024. Interest expense decreased 63.9% to $18.3M following the $1.0B debt repayment in 2024. Net income reached $32.2M compared to a net loss of $27.7M in the prior year.
Adjusted EBITDA rose to $112.6M (41.6% margin) from $93.9M (40.0% margin), reflecting operational leverage. Non-GAAP net income per diluted share was $0.36 versus $0.26. For the six-month period, results mirrored the quarterly trends with revenue up 14.8% and net income of $61.5M versus a net loss of $43.6M.
Revenue is primarily generated from two sources: subscription (48.4% of Q3 revenue) and volume-based (51.1%). Subscription growth (17.3% YTD) is fueled by provider solutions, while volume-based growth (12.7% YTD) is driven by patient payment solutions. Cost of revenue as a percentage of revenue improved to 32.3% from 33.9% for the six-month period, with third-party costs for patient payment solutions at ~60% of related revenue and provider solutions at 6-8%. The Net Revenue Retention Rate improved to 114.6% from 107.5%, indicating strong client expansion. The number of clients generating over $100K revenue grew to 1,268 from 1,117.
Waystar's MD&A highlights strategic priorities including expanding client relationships, growing the client base, and investing in AI. The pending acquisition of Iodine for $1.25B (expected close by year-end 2025) underscores a focus on AI-powered clinical intelligence. Management expects to recognize $17.9M in annual stock-based compensation from IPO awards. No specific financial guidance is provided, but the company anticipates continued growth driven by subscription and volume-based revenue, with Adjusted EBITDA margins expected to remain strong. The debt repayment has structurally lowered interest expense, contributing to profitability.
Cash and cash equivalents rose sharply to $290.3M from $182.1M at year-end 2024, driven by strong operating cash flow of $161.0M in H1 2025. The company also established a new $50.5M investment securities portfolio, primarily in commercial paper and U.S. Treasuries, classified as available-for-sale. Total assets increased to $4.68B, with goodwill remaining flat at $3.02B. Shareholders' equity grew to $3.17B from $3.08B, supported by net income of $61.5M and stock-based compensation of $18.3M.
The Notes disclose no material purchase commitments or contractual obligations beyond normal operating leases and debt maturities. The company has an $80.0M receivables facility (fully drawn) maturing October 2026, and a $1.16B first lien term loan due 2029. Operating lease liabilities total $15.9M, with finance lease liabilities of $11.8M. A $1.25B acquisition of Iodine was announced post-quarter, with $625M in cash and 16.8M shares, subject to closing conditions.
No share repurchases or dividends were declared or paid during the period. The company repaid $5.8M of debt, primarily scheduled principal payments. Capital expenditures totaled $11.2M (2.1% of revenue), including $8.9M in capitalized software development costs. The company maintains a $1.24B total debt position, with no borrowings on its revolving credit facility.
The company operates as a single reportable segment. The CODM (CEO) reviews consolidated financials, with Net Income as the key profitability metric. Revenue is disaggregated into subscription ($256.1M), volume-based ($268.2M), and implementation/other ($2.7M) for H1 2025. No geographic breakdown is provided beyond the U.S. market.
Operating cash flow of $161.0M significantly exceeded net income of $61.5M, indicating strong cash generation from operations. The primary adjustments were depreciation and amortization ($66.8M) and stock-based compensation ($18.3M). Working capital provided a net positive of $4.9M, driven by a decrease in accounts receivable ($0.1M) and increases in accounts payable ($9.3M), partially offset by deferred costs ($5.1M). Capex of $11.2M represented a moderate 7% of CFO, leaving ample free cash flow for debt reduction and strategic investments. Investing activities included $50.5M in investment securities, a new item not present in the prior year. Financing activities were minimal, with $15.0M from stock option exercises and $5.8M in debt repayments. The company did not repurchase shares or pay dividends. Overall, the cash flow profile shows a transition to robust operating cash flow with disciplined capital spending.
Working capital changes were modest compared to the prior year, when a large increase in accounts receivable ($22.9M) constrained CFO. The prior period also included a $19.0M loss on debt extinguishment and $42.4M deferred tax benefit, which normalized in the current period. The purchase of investment securities is a notable use of cash not seen historically, potentially indicating a shift in treasury strategy.